David Bergeron Jeff Baker U.S. Department of Education Federal Update November 27, 2012

Topics  President's 2020 Goal  Title IV Program Budget  College Choice Tools  studentaid.gov and Social Media  Default Rates  Regulatory Activity  Statutory Changes  Verification  Experimental Sites  PLUS Loans  Gainful Employment  Questions? - Sessions 2

President’s 2020 Goal (Lessons from the Data) 3

President Obama’s 2020 Goal Goal 10 million more graduates from community colleges, four-year colleges and universities by 2020 (beyond 2+ million expected due to growth) Goal Every American completes one year or more of higher education or advanced training in his/her lifetime Result “Best educated, most competitive workforce in the world” 4

The US has Fallen Behind Globally Percentage of Adults Age with Postsecondary Education 5

Higher Education Is an Imperative 6

7

Higher Education Enrollment:

Graduation Rates: Year Institutions 2-Year Institutions

Tuition and fee growth is outpacing Income 10

Affordability and Quality  The Administration has outlined a blueprint to address college access, affordability, quality and completion:  Make landmark federal investments in higher education  Galvanize the shared responsibility of States, institutions and the federal government  Provide students and families with the tools they need to plan for and afford college 11

Federal Investments  Increasing Pell Grants - President Obama has raised the maximum Pell Grant award to $5,635 for the award year  Total Pell Grant recipients have increased by 50% since 2008 – from 6 million students in 2008 to more than 9.5 million today  Direct Savings to Help Students - Conversion to Direct Loans saved $68 billion dollars over 10 years, of which $40 billion has gone directly to students 12

Federal Investments  Help Students Manage Debt -  Income-Based Repayment will allow students to cap repayment of loans at 10% of monthly income  Public Service Loan Forgiveness supports students pursuing public service careers.  The President has called on Congress to freeze student interest rates at 3.4%.  Double Work-Study Jobs - Doubling the number of federally funded work-study jobs over the next five years 13

Federal Investments  Easing Access to Federal Aid  Simplification of the FAFSA has helped fuel a 30% increase in applications since 2009  More than 21 million students will submit a FAFSA this year  Expand Education Tax Credits  Propose to make permanent The American Opportunity Tax Credit (AOTC) provides 9.4 million students and families with up to $10,000 for four years of college. 14

Shared Responsibility  Race to the Top – College Affordability and Completion  A $1 billion competition to drive systemic State reforms that lead to increased affordability, quality and productivity at colleges of all levels  First in the World Innovation Fund  A $55 million investment in individual colleges and nonprofit organizations to develop, validate or scale up innovative and effective strategies for boosting productivity and enhancing quality 15

Shared Responsibility  Campus-Based Aid Reform  Revision of the campus-based aid programs to provide $10 billion in aid for students at institutions that most effectively serve students, contain costs, and demonstrate positive educational and employment outcomes 16

Program Budget and Sequestration 17

Title IV Aid Available 18 * President’s FY 2013 Budget Request

College Choice Tools Know Before You Go Know Before You Owe (Session 2) 19

College Navigator Tool 20

College Scorecard 21 College Scorecard An online tool that will make it easier for students and families to compare colleges by comparing information such as: net price; graduation rates; default rates; student loan debt; and earnings potential

Financial Aid Shopping Sheet 22 Institutional Metrics: Graduation rate under “Student Right-to-Know” Most recent cohort default rate Median debt for completers Loan repayment information Contact information Cost of Attendance Elements Grants and Scholarships Work Options Loan Options Other Options Including Family Contribution Student Specific Information: Net price After Grants

studentaid.gov and Social Media (Session 28) 23

Federal Student Aid Websites

Solution: StudentAid.gov

FSA Social Media Twitter Facebook YouTube 26

FFEL/Direct Loan Cohort Default Rates (Sessions 12, 13 and 20) 27

What is the CDR Calculation?  A cohort default rate is the percentage of the number of the school’s FFEL and Direct Loan borrowers who enter repayment in one Federal Fiscal Year (October 1 through September 30) who default in that federal fiscal year or by the end of the next federal fiscal year 28

29

HEOA Changes  Increases the CDR monitoring period from two to three years.  Beginning with the 2009 cohort, the calculation will be:  Borrowers who default in that federal fiscal year or by the end of the next two federal fiscal years  FY year rate is 13.4%  Establishes a three-year transition period for sanctions 30

Transition Period 31

Regulatory Activity 32

 Loans I (Session #8)  Final rule published November 1,  Pay as You Earn  Direct Loan Income Contingent Repayment Plan Option  Possible Early Implementation of Pay  Total and permanent disability application simplification  Some SSA Determinations Regulatory Activity 33

Pay As You Earn  Income Based Repayment (IBR) Plan  Statutory - FFEL and Direct Loan  Maximum annual payment amount is 15% of discretionary income  Remaining balance forgiven after 25 years.  New Law (SAFRA) – Effective 2014  Maximum annual payment amount is 10% of discretionary income  Remaining balance forgiven after 20 years.  New Borrowers on or after July 1,

 Pay As You Earn Plan Repayment Plan  Amend ICR regulations to –  Reduce maximum annual payment amount from 15% of discretionary income to 10%  Reduce forgiveness time from 25 years to 20 years  Available to more borrowers  New borrowers as of October 1, 2007  Received a Direct Loan on or after October 1, 2011 Pay As You Earn 35

 Loans II  Stand alone Direct Loan regulations.  FFEL origination elimination  Reasonable and affordable payments for defaulted loan rehabilitation Regulatory Activity 36

 Teacher Preparation  TEACH Grant  Title II accountability and reporting systems  Pell Grant  Finalization of Summer Cross-Over Interim Rule  Fraud Prevention  New Neg Reg Process  Early in Regulatory Activity 37

Statutory Changes 38

Ability-to-Benefit (ATB) (Session 3) Consolidated Appropriations Act, 2012 –  Eliminated Title IV eligibility for students without a high school diploma or equivalent (unless the student was homeschooled)  Beginning with the award year  See DCL GEN and DCL GEN

Ability-to-Benefit (ATB)  Equivalent of a high school diploma :  A GED  A State certificate that is recognized by the state as the equivalent of a high school diploma  Successful completion of at least a two-year program that is acceptable toward a BA  Documentation that the student excelled academically in high school. Enrollment must be for an associate degree or equivalent 40

Ability-to-Benefit (ATB)  Exception:  Students who are or were, enrolled in a Title IV eligible program anytime prior to July 1, 2012, may continue to qualify under one of the ATB alternatives  Approved ATB test  Completion of six credit or 225 clock hours 41

Pell Duration of Eligibility (Sessions 4 and 10) Consolidated Appropriations Act, 2012 –  Establishes the duration of a student’s eligibility to receive Pell Grant to be 12 semesters or its equivalent.  Effective with the award year.  Applies to all students  Includes all years of the Pell/Basic Grant Program  Back to the Award Year  See DCL GEN and various Electronic Announcements and Tech References 42

Pell Duration of Eligibility  Calculate the 12 semester equivalency by adding together each of the annual percentages of a student’s scheduled award that was actually disbursed to the student  Results in LEU – Lifetime Eligibility Used  Once LEU reaches 600%, student no longer eligible for Pell Grant funding  If LEU more than 500% but less than 600%, partial eligibility for the award year 43

Grace Period Interest Subsidy Consolidated Appropriations Act, 2012  Temporarily eliminates the interest subsidy on Direct Subsidized Loans during the six month grace period  Applies to new Direct Stafford Loans for which the first disbursement is made on or after July 1, 2012, and before July 1, 2014  Accrued grace period interest not paid will be capitalized  Borrower could have some loans with interest subsidy and some without when in grace period 44

No Subsidized Loans for Grad Students The Budget Control Act of 2011 –  Ended the e ligibility of graduate and professional students for Subsidized Loans  Effective for loans made for loan periods beginning on or after July 1, 2012  Subsidized Loans for loan periods beginning before July 1, 2012 remain unchanged  COD will enforce 45

Subsidized Loan Limitation P.L –  Established a limit of how many years a student may receive subsidized loans  Applies to “new borrowers” on or after July 1, 2013  When student has received subsidized loans for 150% of the published time of the academic program –  The student may not receive any additional subsidized loans, and  The subsidized loans received from July 1, 2013 on lose their subsidy 46

Subsidized Loan Limitation Program LengthLimitation on Subsidized Loan Eligibility 4-Year Bachelor’s Degree6 Years of subsidized loan eligibility 2-Year Associates Degree3 Years of subsidized loan eligibility 1-Year Certificate Program1 ½ Years of subsidized loan eligibility 10 Week Certificate Program 15 Weeks of subsidized loan eligibility 47

Subsidized Loan Limitation  Transfers –  Students maximum time to receive subsidized loans is established based on the length of the program the student is enrolled in  Remaining subsidized eligibility is calculated by subtracting from maximum eligibility the time the student has already received subsidized loans 48

Subsidized Loan Limitation  Transfer Examples –  Student receives three years of subsidized loans while enrolled in a two-year program  Student transfers to a four-year BA program  Student has three years of remaining subsidized loan eligibility  Student receives three years of subsidized loans while enrolled in a four-year BA program  Student transfers to a two-year AA program  Student has no remaining subsidized loan eligibility 49

Subsidized Loan Limitation  FSA will track, calculate, and inform students and institutions.  Likely to be codes and comments on SARs and ISIRs.  COD editing and enforcement.  Schools will need to provide program information, including length of program  Probably as part of COD reporting 50

Verification (Sessions 6, 26 and 30) 51

Verification Items  Still some tax filers not able to obtain IRS Tax Return Transcripts  Electronic Announcement (EA) posted to IFAP on November 2  Copy of tax return acceptable if tax filer unable to secure IRS Tax Return Transcript  Documentation of transcript request failure  Completed IRS Form 4506T-EZ or Form 4506-T to school.  School does not submit to IRS unless there is a question about the submitted return 52

Verification Items  Annual Federal Register notice—  Items to verify  Acceptable documentation  Federal Register Notice: July 12, 2012  DCL GEN-12-11, July 17,

Verification Items  Same core FAFSA items as in  AGI  Taxes Paid  Four Untaxed Income Items  Education Credits  Number in Household  Number in College  SNAP  Child Support paid 54

Verification Items  Fraud Detection and Prevention –  Two new verification items to combat fraud  High School Completion Status  Identity/Statement of Educational Purpose  Guidance on acceptable documentation forthcoming 55

Verification  Five Verification Tracking Groups  Group V1 - Standard Verification Group  Same core FAFSA items as in  Group V2 - SNAP Verification Group  SNAP Only  Group V3 - Child Support Paid Verification Group  Child Support Paid Only 56

Verification  Five Verification Tracking Groups  Group V4 - Custom Verification Group  High School Completion  Identity/Statement of Educational Purpose  SNAP, if reported on ISIR  Child Support Paid, if reported on ISIR  Group V5 - Aggregate Verification Group  All items from Groups V1 and V4 57

Unusual Enrollment Patterns  Students identified based on Pell Grant data  New C code added to ISIR  New Unusual Enrollment History Flag added to ISIR  Flag value will determine needed action  Guidance on how to resolve forthcoming 58

Experimental Sites Initiative (ESI) 59

ESI – The Experiments 1. Pell Grant – Eligibility of Students with BA if enrolled in vocational programs – 13 schools 2. Pell Grant – Eligibility of short-term vocational programs – 15 schools 3. Direct Loan – Single disbursement for study abroad students for one-term loan period – 5 schools 4. Direct Loan – Early disbursement for students in study abroad programs and at foreign institutions – 9 schools 60

ESI – The Experiments 5. Direct Loan – Unequal disbursements – 6 schools 6. Direct Loan – Limiting unsubsidized loan amounts – 17 schools 7. Direct Loan – PLUS Loans for parents of students with intellectual disabilities – 1 school 61

ESI - Solicitation of Additional Schools  Look for upcoming Dear Colleague Letter inviting institutions to apply for one or more of the experiments beginning with the award year 62

PLUS Loans (Session 17) 63

PLUS Loans  Adverse Credit regulations at (c)(vii)  Protect borrowers from excessive debt/default.  Protect taxpayers from default risk  Includes debts 90 or more days delinquent  Includes debts sent to collection agencies and debts written off  These delinquencies are at least 90 days past due  Opportunity for reconsideration under “extenuating circumstances” provision of the HEA 64

PLUS Loans  Extenuating Circumstances  Case by case determination based on a number of borrower factors  In addition to other factors (e.g. repayment, disputed debt) could include –  Cumulative past due debt of a deminimis amount  Past PLUS Loan receipt 65

PLUS Loans  Additional Unsubsidized Eligibility  If parent borrower approved based on extenuating circumstances but “additional unsubsidized” loan has already been awarded –  School may not disburse any of the additional unsubsidized loan that had not already been disbursed as of the date of the PLUS Loan approval  Any of the unsubsidized loan that had been disbursed does not need to be returned 66

PLUS Loans  Additional Unsubsidized Eligibility  The amount of the disbursed unsubsidized loan must be considered when calculating the amount of the parent’s PLUS Loan  The school, working with the parent, may decide to reverse the disbursed unsubsidized loan so that the student has less debt and the parent can borrow more PLUS 67

Gainful Employment (Session 23) 68

GAINFUL EMPLOYMENT  Gainful Employment Electronic Announcement #39  On June 30, 2012, the U.S. District Court for the District of Columbia, in the Association of Private Sector Colleges and Universities (APSCU) v. Duncan, issued a decision that vacated most of the gainful employment regulations that the Department published on October 29, 2010 and June 13, 2011 and remanded those regulations to the Department for further action. 69

GAINFUL EMPLOYMENT  The Secretary’s statement in response to the Court’s ruling: "The court clearly upheld the authority to regulate college career programs, but found that the Department had not provided enough explanation of the debt repayment rate measure. We are reviewing our legal and policy options to move forward in a way that best protects students and taxpayers while advancing our national goal of helping more Americans get the skills they need to compete in the global economy." 70

GAINFUL EMPLOYMENT  Reporting –  The Court’s decision vacated the gainful employment reporting requirements in 34 CFR 668.6(a). Therefore, institutions are not required, at this time, to submit gainful employment reports for the most recently completed award year  Institutions may voluntarily submit corrections to previously reported gainful employment information 71

GAINFUL EMPLOYMENT  New Gainful Employment Programs –  The requirements that went into effect on July 1, 2011, under 34 CFR (c) and (d), that addressed the types of new programs about which institutions had to notify the Secretary are no longer in effect  Institutions must comply with those regulatory sections as they existed prior to July 1, 2011, and any other provisions that require institutions to obtain approval for new programs  See GE Electronic Announcement #41, posted to IFAP on November 21 72

GAINFUL EMPLOYMENT  Disclosures –  The Court left in place the October 29, 2010 regulations at 34 CFR 668.6(b) that require institutions to disclose certain information about each of their Gainful Employment Programs Those regulations took effect July 1, 2011  Institutions must update their GE Program disclosures no later than January 31, 2013  See GE Electronic Announcement #42, posted to IFAP on November 23  See Session #47 at conference 73

QUESTIONS? - Sessions Session 2 – Higher Education Choice Session 3 – ATB Session 4 – Pell Grant Session 6 – Verification Session 8 – Repayment Plans Session 10 – COD Sessions 12 and 13 – Default Management Session 17 – PLUS Processing 74

QUESTIONS? - Sessions Session 20 – CDR Session 23 – Institutional eligibility Session 26 – FAFSA Session 28 – Social Media Session 30 – Fraud Prevention Town Hall – Friday Morning 75

THANKS 76